Smallest quarterly profit for ArcelorMittal since 2016

Posted on 10 May 2019

Source: Bloomberg

The world’s biggest steelmaker reported its smallest quarterly profit since 2016 and warned that global demand outside of China will be lower than previously expected as the industry faces increasing pressure.

ArcelorMittal posted first-quarter earnings before interest, taxes, depreciation and amortisation of US$1.65bil, missing the average analyst estimate. The company’s shares fell to the lowest since November 2016.

ArcelorMittal now sees global demand outside of China rising 1%-2% and the company is forecasting a contraction of up to 1% in Europe.

China is seen as a rare bright spot, with the biggest consumer now expected to use more steel this year due to economic stimulus and real-estate demand. ArcelorMittal had previously forecast a contraction in Chinese demand.

ArcelorMittal said it was shuttering plants in Poland and Spain as it responded to the worsening environment.

The company said safeguard tariffs imposed by the European Commission earlier this year have failed to stem a rise in flat-steel imports into the region.

ArcelorMittal’s debt increased to US$11.2bil and the company said it adjusted its borrowing target to US$7bil after it adopted new accountancy regulations.

The company has made debt reduction one of its key goals, having said previously it aimed to cut borrowings to US$6bil before it restarted paying more than a token dividend.

“Profitability has been impacted by lower steel pricing due to weaker economic activity and continued global overcapacity, as well as rising raw-material costs as a result of supply-side developments in Brazil.”

The stock fell as much as 4.8% to the lowest since November 2016 and traded 4.5% lower by 9:35am in Amsterdam yesterday.

The results “confirmed that the Q1 was going to be a light quarter, reflecting the margin squeeze evident in western markets,” Jefferies Financial Group said.

“It’s too early to judge success from recently announced European production cuts but we expect this to be a point of focus on the call this afternoon.”